Las Vegas Sun

November 17, 2018

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Three big casinos bet on growth in northwest LV

Ten years ago, recalls Chris Lowden, people thought his father was crazy.

Paul Lowden, head of Santa Fe Gaming Corp., a company then known as Sahara Casino Partners Ltd., wanted to build a hotel-casino in northwest Las Vegas.

At that time, recalls Chris Lowden, there wasn't much to northwest Las Vegas.

"You go back and read (old newspaper articles) and say, jeeze, we should be closed by now," said Lowden.

But while others wondered about the efficacy of building a casino in what then seemed the middle of nowhere, Paul Lowden had faith that the northwest would eventually be a center of urban development.

"His philosophy was get in now and get in first," said Chris Lowden, executive vice president of operations at Santa Fe Gaming Corp.

A decade later, it appears to have been a pretty smart move. The Santa Fe hotel-casino is now located in the middle of some of the fastest-growing population centers in Southern Nevada. Its 1991 opening was followed by the openings of the Fiesta hotel-casino in 1994 and Texas Station in 1995.

It was also followed by the rapid development of a lot of open desert into residential housing.

"A lot of those big, empty spaces are now filled with apartments and new houses," said Kevin Kelley, general manager of Texas Station.

"There's a lot of growth out there," concurs George Maloof, president of the Fiesta.

Indeed, the three casinos are located in two of the fastest-growing ZIP codes in Clark County. According to Clark County planning department figures, the Santa Fe's 89130 ZIP code grew by 94 percent, or 10,995 people, in the past five years. Since 1989, the year plans for the Santa Fe were first announced, the ZIP code has grown by 361 percent -- or 17,739 people -- from slightly less than 5,000 people then to a population of 22,650.

Similarly, the North Las Vegas ZIP code of 89030 that houses the Fiesta and Texas Station hotel-casinos has grown rapidly. The area grew by 22 percent, or 12,552 people, in the past five years and 41 percent, or 19,900 people, since 1989.

More impressive is the population growth in some of the areas to the north and west of the three casinos. The 89129 area, which lies north of Cheyenne Avenue and west of U.S. 95, grew by 212 percent, or 20,820 people, in the last five years. Compared to 1989, the ZIP code has grown 534 percent, from about 4,838 residents then to 30,651 now.

In the 89131 area code, north of Centennial Parkway between Decatur and U.S. 95, growth is just taking off. Area population has increased 261 percent in the past decade, from 1,430 residents in 1989 to 5,167 now. Much of that growth has taken place in the past two years.

The older 89108 ZIP code to the west and south of all three casinos has grown a modest 10 percent in the past five years, while the newer 89128 and 89134 ZIP codes farther to the west grew faster, adding 10,800 and 16,576 residents respectively in the past five years.

Granted, growth in these areas is not as fast as growth in some parts of Henderson. But because they're the only three major casinos in the area, Santa Fe, Fiesta and Texas Station feel they've got a corner on the market.

It is the growing areas along U.S. 95 to the northwest that all three properties see as key to their success. And because a law effectively banning new neighborhood casino construction went into effect on Jan. 1, they don't appear worried about new competitors dipping into their bucket of gambling customers.

Not surprisingly, all three properties have expanded or are thinking about expanding.

First was Texas Station. In February, Texas completed a $55 million expansion that added 21,000 square feet of casino space, six additional movie screens, a 2,000-space parking garage, a food court and a new bar.

The expansion has driven revenue growth at the property, Kelley said.

"It's been fantastic," said Kelley. "It's what we expected."

Station Casinos does not break its financial results out by property, but overall casino revenues in the quarter that ended March 31 grew to $186 million from $164 million in the year-ago quarter. Net revenues grew from $204.8 million to $230 million in the quarter.

At the same time, casino expenses grew from $79.6 million to $89.1 million. Station Casinos lost $4 million, or 11 diluted cents per share, in the quarter, a slight improvement over a loss of $4.5 million, or 13 diluted center per share, in last year's quarter.

In addition to Texas Station, Station Casinos owns the Boulder, Palace and Sunset Station hotel-casinos, the Wild Wild West casino, and two casinos in Missouri.

Kelley says Texas Station's additional capacity was quickly absorbed by the market.

"The Northwest is growing so rapidly that everyone's enjoying good results," said Kelley.

Texas tries to distinguish itself from its competitors by offering superior amenities and services, he said.

"If we do that, I'm not going to have to worry about market share," said Kelley.

Locals casinos by-and-large see their customer base as people living within a 5 to 7-mile radius. Despite the similarities between the three northwest casinos, Kelley believes residents do differentiate between the properties and that they choose their casinos based on factors other than proximity and convenience.

"I do think there are a lot of people who will drive past the Santa Fe and to Texas Station," said Kelley.

While executives at the three properties understandably disagree which is better, they agree that expansion at one property is good for all three.

"It's grown the marketplace," said Kelley of the Texas expansion.

"We're only two months into their expansion, and our volume is better than it's ever been," said Maloof.

For its part, the Fiesta is building a 50,000-square-foot expansion, including 20,000 square feet of new casino space, three restaurants, 20,000 square feet of new banquet space and a 1,000-space parking garage. The Fiesta also plans a theater complex in a later phase of its expansion.

Maloof said there is a synergistic relationship between the Fiesta and Texas Station. With the two properties so close together -- the Fiesta is on the northeast corner of Rancho Drive and Lake Mead Boulevard, and Texas Station is on the southeast corner -- people drawn to one property inevitably check out the other, he said.

With business picking up in the wake of the Texas Station expansion, Maloof said, there's every reason to believe Fiesta's expansion will drive even more business to the area.

Kelley agrees.

"I look forward to ... his new expansion," said Kelley. "I think it's going to be a great thing for this corner."

Fiesta is a privately held company, and its financial details are not available for public scrutiny.

Like Kelley, Maloof feels gaming customers do distinguish between the three northwest casinos, despite their similarities.

"We do have an identity that we pay out more," said Maloof. "You can't fool a slot player."

Santa Fe officials have no immediate plans to expand, but concede they're considering the possibility. Lowden said the Santa Fe is doing just fine as it is.

"The property's done well without expanding," said Lowden.

In the quarter that ended March 31, the Santa Fe hotel-casino generated revenue of $19.7 million, an increase of 9.4 percent over the previous year's quarter. Earnings before interest, taxes, depreciation and amortization -- EBITDA or cash flow -- rose 9.6 percent, from $5.1 million in last year's quarter to $5.6 million.

Though they have no announced expansion plans, Santa Fe officials are considering some changes to keep pace with the rapidly expanding northwest.

"There are some things we'd like to do, and we'll be looking at those things," said Lowden.

Those possibilities include more parking spaces, a larger buffet, more slot machines and perhaps a new restaurant. The Santa Fe is currently renovating all its rooms, said Lowden.

Longer term, "I could use some more rooms," said Lowden. "As the market grows, the business grows, you have to grow with it."

The company has no timeframe in mind for expansion.

Not surprisingly, Lowden thinks the Santa Fe succeeds by offering the best gaming bang for the buck. But the Santa Fe's greatest advantage over its competitors is its location 4.2 miles farther up the U.S. 95 corridor -- and that much closer to new residential developments in the northwest -- than Texas Station or the Fiesta.

"We're in a great position to be capturing the majority of that growth," said Lowden.

All three executives see SB208 -- a law passed in 1997 that makes it much harder to get permits to build casinos in residential areas -- as beneficial.

"The city keeps growing, the casinos don't," said Lowden. "(Gaming's) growth is being slowed because people don't want these in their back yards."

But they admit that two casinos slated to open on the far west side of town -- Seven Circle Resorts' Resorts at Summerlin and Coast Resorts Inc.'s Suncoast -- will eat into their customer base.

"There's no doubt that they will encroach on some of our market share," said Kelley.

"I would say they would be a risk, yeah," said Maloof. "I don't see it helping."

Despite their assertions that the northwest is growing fast enough to generate plenty of market for everyone, the executives concede that competition between the properties is fierce.

"The northwest market is a great market, an extremely fast-growing market," said Lowden. "It also happens to be a fiercely competitive market."

That competition is likely to become even more fierce when the Resort at Summerlin and Suncoast enter the market, and when the area's population growth eventually slows.

"Growth has been so dynamic that sooner or later, it's going to flatten out a little," said Maloof.

But tighter competition can only benefit the gaming public, said Kelley.

"It's a great thing for the northwest, the fact that there are three properties that provide good product for their guests," said Kelley.

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